If business is slow, you may be facing business insolvency. This happens when you can no longer make your payments or credit agreements. If you are faced with insolvency, you will need to cease trading immediately but there may be other options available. It is best to talk to a professional insolvency practitioner for all your options and to make sure you are acting legally.
When directors continue to operate even though they know they cannot make their financial demands, then in some circumstances a director can be held liable for the limited company debts. This means that they have to pay the amount due from their own pockets and could be prevented from running a company in the future for as much as 15 years. Here are a few options when facing business insolvency.
Improve Your Cash Flow
If you have spotted the problem early, you may find that making changes to the way you take payments will help improve your cash flow. This will allow you to catch up on your debts and operate properly in the future. It is often cash flow that is the biggest problems for businesses. Consider taking payments upfront, negotiating better terms with suppliers, using invoice factoring or even changing the way you take payments to allow for credit card and online payments.
Opt for a Pre Pack Administration
When you want the business to continue trading but cannot do it yourself, there is the option of pre pack administration. You have more control over who buys the company and may be able to stay on as a director. The problems stay out of the public eye and the company debt can be wiped clean, allowing the new owners to start afresh. This is one of the most popular options but you will need an insolvency practitioner to make sure it can be legally done.
Opt for a Company Voluntary Agreement
This isn’t one of the easiest at the start but offers so many advantages that many companies look into opting for this to deal with business insolvency. When you opt for this, you can keep trading and will have methods to help change your cash flow and make your business work for you. However, you will need to prove that your business has been viable in the past and could be viable in the future. The debts are also frozen while an agreement is in process so you will not need to worry about HMRC or any other company chasing you for the money owed.
There are different options available but there are pros and cons to each one. If you have received a winding up petition or you know that your business is struggling financially, you will need to act quickly. It is best to hire a professional insolvency practitioner to make sure that you act legally and within the right time frame. A practitioner will also be able to offer the best advice to help fight against business insolvency and your options to keep trading.